U.S Announces new Russia Sanctions. What it means for Distributors.

Yesterday, as you are no doubt aware, the United States announced a new round of sanctions against the Government of the Russian Federation for

efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; to engage in and facilitate malicious cyber-enabled activities against the United States and its allies and partners; to foster and use transnational corruption to influence foreign governments; to pursue extraterritorial activities targeting dissidents or journalists; to undermine security in countries and regions important to United States national security; and to violate well-established principles of international law, including respect for the territorial integrity of states.

The effect of the sanctions are to block the interests in property of certain persons (including both individuals and companies) in the technology or defense and related materiel sector, persons who have engaged in malign activities, and other persons and entities holding key roles in the Russian government or blocked entities (the full list is described in the Executive Order).

Sanctions against Russia are not a new concern for aircraft parts distributors. For many years, companies exporting to Russia have been required to review their customer and end users–as well as the individuals and entities that own or control the customers and end users–to determine whether they are subject to any of the existing sanctions regimes arising out of the situation in the Crimea region of Ukraine or other sanctions regimes imposed by the U.S. Treasury Department and administered by OFAC.

In limited cases, sanctioned persons have been corporations with a direct nexus to aviation, e.g., Rostec, Avia Group, and Avia Group Nord. In other cases, exports to entities like Aeroflot and United Aircraft Corporation may require a license depending upon facts of the transaction due to the ownership or control exercised by a sanctioned entity, like Rostec, or a high-powered individual.

The latest round of sanctions is likely to have both effects. A company called Unijet–which offers on-demand VIP business jet service–was added to the list, as well as a range of individuals and large institutions that could indirectly have a controlling interest in or position with aerospace and aviation companies.

What does all this mean for aircraft parts distributors? Unless you are doing business with one of newly listed parties, not much has changed. You already should be performing a review of your customer and obtaining detailed end user information when exporting aircraft articles to ensure compliance with OFAC sanctions (as well as BIS export regulations). When a customer, end user, or person or entity with control (more than a 50% stake) appears on the OFAC Sanctions List, you must obtain a specific license or identify an appropriate authorization prior to export.

Exports to persons in nations subject to U.S. sanctions can be tricky. Due to the nature of state-owned enterprises and monopolies, and the powerful individuals that control them, you must often dig through many layers of ownership and control to determine whether or not a blocked person is involved in the transaction. Such diligence should be memorialized in writing and kept with the other records retained for the transaction so that you can demonstrate the efforts you took to clear any red flags if the government ever asks.

Whenever you have questions about export compliance–and especially when you are dealing with customers in countries that have been subject to U.S. or international sanctions–we always recommend you consult with an export compliance attorney to help you .

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